Many New Causes for Old Problem of Jobs Lost Abroad

By STEVE LOHR

Published: February 15, 2004

The chairman of President Bush's Council of Economic Advisers, N. Gregory Mankiw, stepped forcefully last week into an issue that has touched off an escalating, often strident, political debate: the migration of jobs, ranging from call center operators to computer programmers, to lower-cost countries like China and India.

The movement, known as offshore outsourcing, is growing, Mr. Mankiw acknowledged. But he said it was ''just a new way of doing international trade'' and ''a good thing'' that would make the American economy more efficient and would free American workers to eventually get better jobs.

History suggests that Mr. Mankiw may be right. The American economy has adapted to unsettling new waves of competition in the past.

Still, many industry executives, analysts and academics -- not distraught American workers alone -- say the nature of the economic challenge appears to be fundamentally different this time.

The differences, they say, include the kinds of jobs affected by outsourcing, the number of jobs potentially at risk and the politics of developing an effective policy response.

Globalization and technology are amplifying the impact of outsourcing. For decades, American foreign policy has been to urge developing nations and Communist countries to join the global economy in earnest. Now they have, and vast numbers of skilled workers have joined the world labor force, seemingly overnight. Countries like China, India and Russia educate large numbers of engineers. Add the low-cost, nearly instantaneous communication afforded by the Internet, and an Indian computer programmer making $20,000 a year or less can replace an American programmer making $80,000 a year or more.

''The structure of the world has changed,'' said Craig R. Barrett, chief executive of Intel, the Silicon Valley company that is the world's leading computer chip maker. ''The U.S. no longer has a lock on high-tech, white-collar jobs.''

But that does not mean that such jobs are about to disappear from the United States. Statistics on the current job flight are estimates. Forrester Research in a frequently cited study, predicted in late 2002 that 3.3 million services jobs in America would move offshore by 2015, about 500,000 of them in computer software and services.

For all the alarm that report generated, a shift of that size over the next 11 years would be small, given that the American labor force has more than 130 million workers and normally creates and destroys millions of jobs every few months.

Many American workers are worried that outsourcing is just beginning, and they fear that in an information-age economy all kinds of jobs are potentially at risk. Not only anxious workers in the United States take that view. Nandan Nilekani, chief executive of Infosys Technologies, an Indian outsourcing company, declared at the World Economic Forum last month, ''Everything you can send down a wire is up for grabs.''

Another difference, some analysts say, is that during the 1980's, the interests of American workers and companies were more closely linked than they are today. From 1984 to 1986, the American semiconductor industry lost $4 billion and shed 50,000 jobs in the United States.

''But now, it is the workers who are suffering and not the companies,'' said Ronil Hira, an assistant professor for public policy at the Rochester Institute of Technology. ''The companies outsourcing jobs overseas are profitable and mostly gaining market share. There's no gun to their head this time, no real motivation to address the issue.''

Beyond jobs shifted, the broader impact may be to put pressure on the wages of many technical workers in the United States, who increasingly live under the shadow of foreign competition.

Chris Neustrup, a software engineer from Walnut Creek, Calif., has seen every boom and bust in Silicon Valley since he graduated from the University of California at Berkeley in 1969. As a seasoned programmer-for-hire, who constantly kept adding to his portfolio of skills, Mr. Neustrup was never out of work for long, and in good years he routinely made $100,000 or more.

But this time, he said, it was different. After 25 months without work, Mr. Neustrup was hired two weeks ago by Emanio, a private software company in Berkeley. The pay is less than he used to make, but he counts himself lucky in this job market. His experience is part of a picture that puzzles economists and policy makers. The economy is growing nicely, corporate profits are rising, and yet job growth remains frustratingly sluggish, even among skilled workers. Some politicians and labor advocates say offshore outsourcing is a betrayal of American workers and support bills to curb it.

Mr. Neustrup, who lives with the turmoil in the high-tech job market, takes a more balanced view. ''It's great for these developing countries to move up and adopt this technology,'' he said. ''The trouble for us in the U.S. is that we're at the top of the ladder getting squeezed. And I'm not sure there is a good answer.''